Journal
INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH
Volume 54, Issue 13, Pages 4008-4027Publisher
TAYLOR & FRANCIS LTD
DOI: 10.1080/00207543.2016.1170906
Keywords
gray markets; parallel imports; manufacturer competition; differentiated duopoly
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In recent years, gray markets have become a significant phenomenon in the business practice. This paper investigates the gray markets issues in differentiated duopoly case by considering quantity competition among firms. We develop a game-theoretic model and provide equilibrium results for three scenarios, i.e. the benchmark scenario 'no gray market', the scenario 'parallel imports act as a buffer against a follower's product' and the scenario 'gray markets stimulate the competition'. By the analysis of the equilibrium results, some important managerial insights are obtained. Finally, by comparison of the equilibrium results among different scenarios, we study the impact of gray markets on manufacturers' optimal strategies and profits in differentiated duopoly.
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